Holding Out For Freelance Work
Hear Norm Rollins, Dave's guest and tax attorney, tell Jeff how much tax to hold out for his freelance work.
QUESTION: Jeff has a full-time job but also does freelancing on the side. He wonders how much you should hold out for freelance work as far as taxes go.
ANSWER: You’ll be subject to federal income tax and Medicare; so-called self-employed tax on everything over $600 net. That’s 15.3%, and then there’s an average of about 20% tax. So I’d look at about 35% of my net, which is whatever I earn in freelance, less my expenses. That is on the high side, but I’d rather have a little more set back. Set up a separate checking account for your freelance income and expenses.